Legal Details – Justice System

Costa Rica Business and Legal Summary
With the proper guidance and preparation, Costa Rica can be a profitable
place to establish a business enterprise while enjoying the tranquility and
diversity of the countryside. The business practices, customs and organization
that you may be accustomed to in your country of origin may not be applicable
to those in Costa Rica.

Be patient; learn the procedures and the local way of doing things
before you embark. If you arrive trying to change the country, attitudes
and practices you will be in for a surprise. The summary that follows will
hopefully assist you in understanding the basic structure of Costa Rican
business.

The Costa Rican political system

Costa Rica is recognized worldwide for its stable and democratic political system.
All changes of government have occurred by way of free elections which
are held every four years. The core of Costa Rica’s democratic political system
is its Constitution. Originally adopted on November 7, 1949, it remains in
effect today, establishing a clear system of checks and balances between the
three branches of government: the Executive, Judicial and Legislative.

The legal system
The Costa Rican legal system is based upon the French civil law system as
opposed to English common law that is used in England and the United
States. The common law system relies more on case law which is generated
by the judicial system and binding on lower courts. In the civil law system,
the laws passed by the legislature are codified into codes which are then applied
by the courts. Only the decisions of the Supreme Court of Costa Rica
are binding on the lower courts. The court system is made up of: Lower
Courts, Trial Level Courts, Appellate Courts and the Supreme Court.
At the present time, delays in processing claims through the legal system
are a serious problem. There is a backlog of cases and the government
does not have the financial resources to adequately staff and modernize the
judicial system to handle those cases.

The country has recently passed legislation which allows for private
mediation and arbitration services in the hope that more cases will be resolved
by way of alternative dispute.

Foreign investors may also participate or invest in Costa Rica using any
of the legal entities recognized by Costa Rican law.

Costa Rican corporate lawThe most common corporate entity used in Costa Rica is the Sociedad
Anónima (S.A.), mainly because the liability of the shareholders is limited
to their capital contributions, and the shares of the corporation may
be freely transferred. The corporation must maintain the following three
books: (1) Shareholders’ minutes book, (2) Board of Directors’ minutes
books, and (3) a Shareholders’ log book.

Taxes in Costa Rica
Yes, we have them also. The Costa Rican tax laws were completely overhauled
in 1995 with the passage of the new Tax Code. Taxation is based
upon source income; in other words, Costa Rica only taxes revenue that is
generated within Costa Rica and not worldwide as other countries do.
Personal income taxes range from 10% to 25% depending on the
amount earned. Corporate taxation ranges from 10% to 30% depending on
the amount. Costa Rica applies a sales tax of 13% and a special consumption
tax on selected items which ranges from 8% to 10%.

The government also collects a property transfer tax of 1.5% which is
triggered whenever a property deed is presented at the Costa Rican National
Public Registry to record the transfer of ownership of property from
one person to another. The same applies to the transfer of ownership of a
motor vehicle which triggers a 2.5% transfer tax.

Property taxes are levied and collected by the municipal government
where the property is located. The property values on the books of municipalities
is far below the actual market value of the property and each
municipality is implementing its own property tax program to update its
property tax data base.*Courtesy of Roger Petersen

How the Justice System Works in Costa Rica
Let’s start with the tico system of justice. If you find it strange that las cortes
(courts) in Costa Rica don’t have room for the jurado (jury) then you
probably haven’t heard that Costa Rica practices a justice system based on
the Roman and French codes that came to us by way of Spain.
The system has several interesting features that make it different from
the common law system practiced in the United States, Canada and England.The most outstanding of them all from the gringo perspective, is the lack
of a jury. Another is that judges don’t have much room for interpretations
and must apply the law as a receta (recipe); if the crime doesn’t fit, they
must acquit.

The precept of inocente hasta que se pruebe lo contrario (innocent until
proven guilty) is also a principle in the Costa Rican system, but whereas in
the common law system judges usually are content to set bail for most types
of crimes, in Costa Rica judges seem more inclined to deny it.

In fact, there is a good number of other measures at the disposal of a
tico judge, collectively known as medidas cautelares (precautionary measures)
that can make the whole process a nightmare for the imputado (suspect).
The four most famous medidas are: arresto domiciliario or casa por cárcel
(house arrest), fianza (bail), impedimento de salida (prohibition to leave
the country) and last but not least prisión preventiva (preventive prison), a
measure intended to keep the suspect from obstructing justice.

You can say that tico justice guards evidence jealously. If you ever find
yourself in hot legal water, by all means try to breathe very carefully and keep a
low profile. A certain ex-president of ours did not answer his phone or tell his
assistant where he was going for four days, and that cost him an orden de arresto
internacional (international arrest warrant). He should have known better.

There is some confusion also as to who presses charges, but there should
not be as practically anybody with a stake in the matter can do it. For instance,
Alcatel pressed charges against two of its former managers, who are in addition
to those already charged by the government. By the way, in this case there is
a difference between el estado (the state) and el gobierno (the government).
The former is represented by the Ministerio Público (Attorney’s Office)
and belongs to the Judiciary, the latter is represented by the Procuraduría
General (the Government’s Lawyer, known as Procurador) and belongs
to the Executive branch. Together they have most of the powers of what
many of you know as a Justice Department, though none have powers as
far reaching when it comes to interpreting the law.

The process itself is composed of four phases, and the name of the
defendant changes accordingly. When the Ministerio Público thinks it has a
possible reason to start an investigation, it opens a process called de instrucción
(instruction) and it is presided over by one or several judges, each making
decisions apart from the other judges. During this phase the defendant is
called imputado (suspect), and it is the job of the judge to say if there is
falta de mérito (lack of merit), if there isn’t, the judge elevates the issue to
a higher office known as a Tribunal; from here on the defendant is called
indiciado (indicted), but you can also call him acusado (defendant) as well.A Tribunal is made up of three judges, one of whom is the president
of the panel. This system is called colegiado. This is by all means a process
similar to that of common law except for the missing jury. After hearing all
the arguments, examining all the evidencia (evidence) and listening to all the
testigos (witnesses), the judges retire to their offices and make their decision
alone, then meet up to vote; this is why a verdict by a Tribunal in Costa
Rica is called a voto (vote).

Regardless of the outcome there is a statutory period during which
any of the parties can file an apelación (appeal); this is the third phase and
it is called casación. This job belongs to the Sala III of the Supreme Court,
which confirms the verdict, orders a retrial or even modifies the punishment.
From here on, the acusado turns into culpable (guilty) or inocente (innocent)
and the big Cosa Juzgada seal is put on the whole matter. Reopening it
constitutes double jeopardy. If found guilty, there is yet one more phase
to go through called ejecución de la pena (execution of the verdict), also
headed by a full-blown judge who though limited by the penal code, can
still change the sentence and even trade it for something else, such as casa
por cárcel (house arrest).

In the Costa Rican system, unlike the common law system, subtle
differences in vocabulary and actions may lead to completely different crimes
and equally different lengths of sentences. The operative word in our system
is la tipificación (the configuration) of the crime.

It all comes down to how Congress worded the law. Tico judges must
closely observe the letter of that law first, and only then consider whatever
jurisprudencia (jurisprudence) may already exist.

With that in mind, let’s begin our journey into the types of crimes that
Mr. District Attorney has at his disposal for doing his job, but just to keep
it manageable let’s limit that journey to crímenes económicos (money related
crimes) committed against the state.

Got an easy way to squeeze money out of the government? Did your pal
learn about this tip of yours and join in? You want to explore the loophole as
far as it takes you? Well then, you are part of a corruptela, a type of actividad
(activity) that may or may not be considered a crimen (crime). It all depends.
Let me explain that one again. The squeezing easy money from the
government part is definitely a crime, so don’t get too excited; what is not
a crime is the casual nature of the affair.

In the tico system the dolo (intent) makes the difference between cárcel
(doing time) or walking free, in almost all instances. That is why legislators
came up with asociación ilícita (conspiracy to commit a crime), which to me
is sort of like “mail fraud” in the United States. If the DA can’t get you for
the big crime, he will get you for mail fraud, at least.

The difference between a corruptela and asociación ilícita is then dolo and
all it takes is to prove that there was some kind of understanding between
the parties. Illicit association carries a six-year sentence.

The situation of the three tico ex-presidents had a lot to do with these
type of tenue (subtle) differences, with two of them in jail and the other
without as much as a formal accusation. At the time this article was written,
both presidents have since released.

Ex-president #1 used to have a rather well-known lawyer’s office
that was equally well-connected. He was hired by a certain corporation,
supuestamente (allegedly) for asesoramiento político (lobbying). However,
he understood differently; to him he was hired to carry out legal work
in agreement with his profession. The problem was that the person who
paid him says he did it as part of a payment requested by the head of a
certain agencia gubernamental (government agency) who was part of a
large scheme to defraud the state of a $40 million dollar loan given by a
certain Scandinavian country. Willingly or unwillingly, he became part of
the scheme and therefore is in deep trouble.

What is left to be determined, then, is his grado (degree) of participation.
That is, how much did he actually know? Let’s start by giving him el
beneficio de la duda (benefit of the doubt), as we should, and let’s say he
was completely unaware of what was going on, thus ruling out intent. This
is the lowest degree of participation, in which case he could be charged with
favorecimiento real (obtaining an actual benefit) from the whole transaction.
Being the good lawyer that he is, however, he proceeded to put all of the
money he got from the transaction into a depósito judicial (escrow account
in the hands of the court). He now can go to the court and say he got no
benefit since he returned the money. That works, too.

If the fiscal (DA) can find so much as a thread ofevidence to prove intent,
however, he can then be charged with illicit association and corrupción, a
crime usually reserved for servidores públicos (government employees), but
that applies to him by way of the head of the government agency. Just to
clarify, contrary to popular belief, an ex-president is not a public servant.
Nevertheless, he has an uphill battle because the head of the government
agency involved in the scheme says (allegedly) it was he who organized
everything and they were simply following his lead; that could turn him
into the corruptor (the corrupting party), which is the highest degree of
participation and the individual who gets the biggest prize in real jail time.
Ex-president #2 has sort of a different story, as he was not as close to the
action. He considers himself, and he may be right about that, a big shot when
it comes to tecnologías de la comunicación (communication technologies) and
as such he was hired by a friend of his to do some asesoramiento (professional
consulting). Nothing wrong there, so far.

In another rather friendly transaction, his friend hired another friend, who
happened to be a prominent member of a prominent party. Her expertise:
filología (philology) or correcting papers, essays and the like in the proper
usage of the Spanish language. She seems to be an expert on the subject, as
she got paid allegedly $900,000 for the job. This is strange because Mr. Big
Shot ex-president also got paid exactly the same amount.

In addition, the friend who hired them also kept another $900,000 for
himself as payment for his networking abilities that provided Alcatel with
so much talento (talent) at so high a price. At this point, I should add that
the gerente (manager) of Alcatel Costa Rica, who hired the friend in the first
place is the brother of the filóloga.

Remember the definition of corruptela above? Well, the Fiscal General
(DA) is working hard to find out if this situation was a corruptela, and, if
so if a crime was committed. Nobody is calling anything a crime yet, except
Alcatel which seems to believe that its manager for Latin America and its
manager for Costa Rica conspired to commit fraude (fraud).

This brings us to ex-president #3. His problem is that he apparently
is into asking for préstamos (loans) from anybody. According to his own
declarations he borrowed from a certain former ICE director a total of
$140,000; Mr. Director says, instead, the money was allegedly part of the
comisión (commission) for helping Alcatel get a government contract. In
total, that company circulated about $13 million dollars in pagos (payments)
and the like. So generous they were that even a certain head of a certain
government agency, if you catch my drift, who had NOTHING to do
with this deal, got money as well. Charges for this case include corrupción
agravada (aggravated corruption).

That is not all, however. He also allegedly borrowed money from the
Taiwanese government and got a contract for asesoramiento (consulting) to
the Spanish company that is working on the under-ground electrification
project of the city of San José. He did drop the consulting gig and his
relationship with the Taiwanese government is not really that clear, either.
Some of these events allegedly took place while he was still in office,
which qualifies him for a whole set of crimes that may or may not apply to the
other ex-presidents, among them: enrequicimiento ilícito (illegal enrichment)
and negociaciones incompatibles (conflict of interest).

Last but not least is the oldest crimen económico on the books: peculado
(embezzlement), which is nothing but the use of state assets to procure a personal
or patrimonial benefit. Which one do you think can be charged with that?*Courtesy of Guillermo Jiménez